The South America Crop Report for February 27, 2017

By Patrick Archer and Eduardo Blasina

 

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The Argentina Crop Report

US$1 = 15.4764 ARS

Argentina lowered its estimate for 2016/17 soybean planting this week from 19.8 million hectares to 19.45 million hectares (48.06 million acres) due to bad weather that impeded second-harvest soybean planting at the end of January. The adverse weather conditions included excess rainfall and flooding in some regions, as well as drought conditions during the summer planting season. That negative news has been offset by much better weather conditions in the grain growing belt of Argentina over the past two weeks, and the Buenos Aires Grains Exchange (BCBA) is now forecasting 2016/17 soybean production of 54.8 million tons. In the BCBA’s February report, the Ag Minister said 2016/17 corn planting in Argentina, the world’s third largest exporter, will be 7.3 million hectares (18.03 million acres), up from the previous forecast of 7.35 million hectares. (America Economía)

The forecast for Argentina wheat planting in the 2016/17 campaign was raised dramatically this week to 18.3 million tons, an 11% increase over the previous forecast of 16.5 million tons and a dramatic 62% increase over last year’s wheat production of only 11.3 million tons. “This is the most important harvest in the history of the Argentine Republic, and for us it is a starting point. We always bet on the farming sector knowing that it is a dynamic, growing and vigorous sector,” said Ag Minister Ricardo Buryaile in his press conference. The new numbers would imply a 45% increase in wheat planting and an exportable balance of 11 million tons. As for corn, Buryaile says Argentina should produce 40 million tons in the 2016/17 campaign and export 24 million tons. The ministry anticipates Argentina’s total crop production in the 2016/17 campaign will be 130 million tons. (Agroinformación)

Mexico’s anti-Trump sentiment, trade fears and repeated threats to replace US corn imports with corn from Argentina and Brazil dominated the headlines and the content of this report last week , but new numbers from Mexico’s leading financial daily lay out just how challenging that might be both economically and logistically. Buying corn from South America would add an additional cost of 6% per ton, according to calculations from the Grupo Consultor en Mercados Agrícolas (GCMA), and the diversification would create a logistical challenge in the early years, as the shipments from South America and Africa would be on smaller ships with less than 40,000 tons. In the article, El Financiero publishes a bar graph comparing Mexico’s current cost of buying corn from the US ($204 per ton) versus Ukraine ($214), Brazil ($215) and Argentina ($216) with the caption: “Buying corn from other countries will only be viable if the US implements the border tax.” (El Financiero)

 

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The Brazil Crop Report

US$1 = 3.1125 BRL

This week Agroconsult raised its forecast for Brazil’s 2016/17 soybean harvest to a record 61.1 million tons, up 19.8% from the 51 million tons produced in the 2015/16 campaign, writes Reuters’ Gustavo Bonato. Agroconsult says the current line-up in Brazilian ports would indicate Brazil soybean exports of 9 million tons in February and March, although the recent pullback in prices and producers’ newfound reluctance to sell could push that number lower for Brazil, the world’s largest exporter of soybeans. In the corn market, Agroconsult is forecasting record production for 2016/17 thanks in part to a 10% increase in total corn planting area. The company is estimating a total corn harvest for 2016/17 of 93 million tons, up 31% from the 71 million tons produced in the 2015/16 cycle. Agroconsult is forecasting Brazil corn exports will double this year from 14 million tons in 2015/16 to 28 million tons in 2016/17. (R7.com)

Brazil’s coffee industry is in full crisis mode, as reported this week on the pages of Germany’s Deutsche Welle. Coffee to Go In Brazil? is the headline of the report which says the world’s largest producer could actually liberate coffee imports and bring in beans from the outside world for the first time in almost 300 years. For the moment imports are suspended under the government of Michel Temer, but the first green light came when the Foreign Trade Chamber (GECEX) lowered the import tariff on café conilon (robusta beans) from 10% to 2%. The German paper says the origin of the controversy has its roots in the 2016 harvest when Brazilian coffee producers saw production fall from 10 to 5 million sacks. “They don’t have enough café conilon to satisfy total demand for coffee in Brazil,” says the Ministry, but the local producers vehemently disagree. “The imports are unnecessary. It’s just a game to lower the price per sack,” says Antônio Joaquim de Souza Neto, the president of the São Gabriel Growers Cooperative (Cooabriel). (Jornal do Brasil)

Update: President Temer did an about-face and reversed his decision.

How the Oldest Dam in Brazil Turned Into a Turtle Cemetery is an interesting article showing the impact of the worst drought in a century in northeast Brazil. “The Paradise Bar is still open with its view of the now evaporated dam, but now only tourists visit the place which only nine months ago was one of the main destinations for farmers in the area. The only thing that moves now in this lagoon with capacity for 126 million cubic meters of water (more than 50,000 Olympic swimming pools) are the silhouettes of a professor and six biology students that came to study the area. Since they began their research in November, they have found 438 dead turtles. ‘In addition to fishing, we lived on tourism and now we are practically at zero. If the water returns to the dam, everything will improve for us,’ says the Paradise Bar’s Gilberto Queiroz.” (Isto é Dinheiro)

 

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The Uruguay Crop Report

US$1 = 28.2975 UYU

Soybean prices continued to move lower this week in Uruguay and the region reflecting the negative trend which began last week in Chicago, writes FarmsUY co-founder Eduardo Blasina in a special report for El Observador. “Here in Uruguay the local reference price this week was US$365 per ton, although the floor of US$360 is being tested. The outlook for producers is very interesting, although there is some reluctance to raise current estimates for the 2016/17 harvest and yields. Barring some major climate disaster, national production of over 3 million tons is relatively assured compared to 2.5 million tons in the 2015/16 cycle. Across the border in Argentina, the potential for high yields in key growing regions is compensating for the recent losses in planting area, while harvest activities are progressing in Brazil where a record crop is also assured.” (Blasina & Associates)

Uruguay agribusiness and infrastructure are the sectors that attracted the most interest among European companies and investors during the country’s trade promotion mission this month to Finland, Germany and Russia. In an interview with Agencia EFE, Uruguay XXI director Antonio Carámbula said the agribusiness sectors garnering the most interest among European investors were forestry and logistics. A related article in La Vanguardia says a consortium of British and Spanish investors are ready and willing to front the capital needed to build the road and rail infrastructure that Finland’s UPM says is needed to support the proposed second paper mill in Paso de los Toros. Several European companies including Sercobe, Tria, Cointer, AZV and NGE have all expressed interest in the plan to build over 300 kilometers of new railways in Uruguay to support the proposed UPM2. (La Vanguardia)

This week begins a new chapter in Uruguay which could mark a major transformation for the local cattle industry and the economy in general, writes FarmsUY co-founder Eduardo Blasina. “The Uruguay Cattle Futures Market (UFEX) goes live this afternoon at 15:00. It will open an online avenue for better managing risk, locking in prices in advance, and serving as a sounding board for the price levels market participants anticipate for the remainder of the year. The contracts will be for 2,500 kilos or basically 10 steer carcasses, and a position will cost less than US$1,000 per contract. The first positions available are for May (harvest) and August (post-harvest). Participation requires the sale or purchase of a minimum of one contract and a security deposit of approximately US$700.” (The South America Cattle Report)

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-Patrick Archer

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